We Saw Another Black Friday Sell-Off For Energy Contracts That Has Carried Through The Weekend

We saw another Black Friday sell-off for energy contracts that has carried through the weekend. The big slide has pushed wholesale gasoline prices in the Midwest and US Gulf Coast below the $2 mark this morning, while diesel values in most US cash markets have dropped below $3. WTI traded below $74 overnight, for the first time in 2022, while Brent dipped below the $81 mark for the first time since early January.

We won’t see the full Commitments of Traders report until later today due to the holiday, but we can see the ICE positions since the UK apparently still doesn’t celebrate American Thanksgiving. Money managers were bailing out of Brent and Gasoil long positions and adding new shorts, which suggests we’ll see a similar reduction in net length for NYMEX contracts, which no doubt contributed to the big price drops over the past week. 

Baker Hughes reported an increase of 4 oil rigs, and a decrease of 2 natural gas rigs drilling in the US last week, with the Permian basin accounting for an increase of 3 rigs. The total US rig count is at a fresh 2.5 year high, but is still 56 rigs below pre-COVID levels.

Last week’s DOE report showed that domestic consumption for gasoline and diesel fuel are relatively soft, even though total US Petroleum demand remains above average. Total supplies remain very tight, even though the gulf and west coasts are seeing inventories for both gasoline and distillates above average levels. Refiners continue to run hard, holding near the top end of their 5 year seasonal range, despite the big reductions in capacity over the past few years.

We’re less than 2 weeks away from a potential rail strike that will disrupt all sorts of supply chains across the US, including fuels. Negotiators are back at the table in Washington DC this week, trying to hammer out a(nother) deal to avoid the first such strike in over 30 years. 

There are just 2.5 days left in the official Atlantic Hurricane season, and the NHC does not project any new tropical cyclones, so the industry can now breathe a sigh of relief that we avoided a major disruption to the supply network that simply wasn’t able to handle it this year. 

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